IRB Infrastructure Developers Ltd.|Q2FY15 Result Update | Reported numbers below estimate due to poor performance in construction segment, maintain HOLD with price target of Rs 226/- :: IndiaNivesh

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IRB Infrastructure’s (IRB) Q2FY15 results were below estimate, led by change in
revenue mix. While the BOT segment income has improved by 106% y-o-y to Rs 4.4
bn, the income from the construction segment has reduced by 31% to Rs 4.8 bn.
However, we expect construction income to increase in H2FY15E as more projects
start getting operational going forward. Its consolidated sales decreased 6% y-o-y
to Rs 8.8 bn (estimate – Rs 10.3 bn). However, EBITDA increased 24% y-o-y to Rs 5.2
bn (estimate – Rs 5.5 bn). EBITDA margins of IRB were at 59.2% in Q2FY15 vs. 44.9%
in Q2FY14. Improvement in y-o-y EBITDA margin is mainly owing to 40% decline in
contract and site expenses to Rs 1.9 bn. Its net profit increased 14% y-o-y to Rs 1.2
bn (estimate - Rs 1.3 bn). Net profit margins increased to 13.3% from 11.0%.

Valuation
The company reported weak set of number in Q2FY15. At CMP of Rs 255, (as per
Bloomberg estimates) IRB is trading at FY15E & FY16E, EV/EBITDA multiple of 8.4x
& 7.1x, respectively. Using our Sum-of-the-Parts (SoTP) based valuation
methodology, we arrive at FY16E based price target of Rs 226/- share and continue
to maintain HOLD rating on the stock.
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